Dogged by serious delays and cost overruns, the two bungled helicopter deals stood out in Sheila Fraser’s annual fall report.

Auditor General Sheila Fraser holds a news conference after the release of her fall report on Parliament Hill in Ottawa, Tuesday October 26, 2010.

By:Richard J. BrennanOttawa Bureau, Published on Mon Nov 01 2010

OTTAWA––Auditor General Sheila Fraser on Tuesday slammed Canada’s contracts to buy military helicopters saying the process was an $11-billion mess and even accused National Defence of deliberately hiding the real cost.

Dogged by serious delays and cost overruns, the two bungled helicopter deals stood out in her annual fall report. In fact, she highlighted the decades-old saga of deals gone wrong in the multi-billion purchase of two sets of helicopters – 28 CH-148 Cyclones and 15 CH-147F Chinooks, both of which roughly doubled in cost over a matter of a few years.

“We also found that National Defence underestimated and understated the complexity and development nature of the helicopters it intended to buy. The substantial modifications to the basic models, resulted in significant cost increases and project delays,” she said.

Considering the problems associated with the helicopter purchases, Fraser also raised alarm bells about $16-billion purchase of F-35 fighter jets, promising she would be probing that deal as well.

The purchase of the Cyclones was launched by the previous Liberal government and the Chinooks were bought by the Conservatives in a deal that Fraser suggests broke government guidelines.

“The contract award process was not fair, open and transparent,” Fraser told reporters,

Fraser said even after lengthy delays and significant cost overruns, National Defence still hasn’t come clean on what it will cost to operate the helicopters, which she says could result in serious problems down the road.

“Without this costing information and sufficient funds, National Defence may have to curtail planned training and operations. This is cause for concern,” she said.

The CH-148 Cyclone is a maritime helicopter that will replaces the aging Sea King helicopters and the CH-147 Chinook is a medium-to-heavy lift helicopter, both of which have been delayed by seven and five years respectively.

Fraser said National Defence deliberately downplayed the significant changes that would have to be made to the helicopters, telling the Treasury Board that it was “off-the-shelf” technologies and therefore low to medium risk.

But in the case of the Cyclone, Canadian specifications have meant that Sikorsky is having to build a “state-of-the-art helicopter that has never existed before.”

While the Harper government will have to defend both contracts, the saga of the Cyclones date back to Prime Minister Brian Mulroney’s Progressive Conservative government when he wanted to replace the Sea Kings, which dated back to 1963.

Mulroney’s government finally settled on the EH-101 helicopter, but Jean Chrétien scuppered the deal after winning power in 1993, costing Canadian taxpayers $478 million in penalties.

While talk of new helicopter continued to percolate it wasn’t until after Chrétien left that then Prime Minister Paul Martin’s government signed a $1.8 billion contract with Sikorsky Aircraft Corp. in November 2004 for the delivery of 28 Cyclone helicopters in January 2009.

Fraser said the problem with the National Defence deal was that it asked for so many changes to the so-called off-the-shelf helicopter that it in effect developed a new state of the art helicopter, but added this was not reflected in the project’s risk assessments.

She also said the military didn’t properly account for the billions of dollars in in-service support, training and infrastructure needs connected with housing the new choppers.

The all-in cost of the Cyclone went from preliminary cost of $3.1 billion in June 2003 to $5.7 billion just over five years later, while the Chinooks jumped from $2.022 billion in June 2006 to almost $5 billion three years later.

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